The growing role of big data across all industries is undeniable. In the medical field, for instance, the Financial Times describes how individuals are investing billions of dollars in order to access “clinical insights contained in vast troves of anonymized patient records.” The ability of analysts to identify trends from this massive collection of data is invaluable, enabling them to obtain predictive insights for further examination. In fact, Maryville University’s industry outlook for business data analytics reveals that data gathered and created is expected to reach 180 trillion gigabytes by 2025, with sectors like banking, manufacturing, government, and professional services benefiting the most from advances in analytics. And when it comes to the area of risk management, the ability to assess and identify potential threats that face your organization is strongly aided by big data. The financial ramifications of big data are evident, with Reports and Data estimating that the risk analytics market will be valued at a total of $65 billion by 2026. Here are some ways in which big data analytics has impacted the field of risk management:
The rise of big data analytics in risk management
1. Quickly identifying trends and potential risks
No matter what field you’re in, swiftly spotting future threats and finding ways to safeguard your business is critical. Big data helps you compare internal and external data, enabling you to detect and analyze fraudulent activity more efficiently. Cybersecurity threats are becoming more advanced and commonplace than ever, so having regularly updated measures in place to counter these movements is especially vital.
2. More accurate forecasting and decision-making
The ability to accurately predict future trends is a priceless asset to any business. This is why Entrepreneur emphasized the importance of creating revenue forecasts in the early stages of your business. However, with the advent of big data, it is becoming easier than ever to create detailed forecasts, leading you to make key decisions decisively and confidently. Manually gathering data has become a thing of the past, reducing the room for human error. Big data enables managers to easily detect and analyze patterns that could signal a crisis or a sudden change in the markets or even individual accounts. However, you should always ensure that the data you collect is from authentic sources in order for accurate forecasting to take place.
3. Lower operating costs
Possessing the right business intelligence tools can lead to the identification of cost-reducing opportunities. While it can be a relatively easy process to see a large boost of growth in your business once an acquisition is made, constantly seeing small improvements over time may be more difficult. However, big data analytics can enable you to quickly identify any anomalies in your margins, allowing you to make changes in price and cut costs where needed. This is especially useful for larger companies with multiple facilities, where these anomalies may go unnoticed.
4. Improved capital efficiency
By identifying areas of risk in your business, you can get rid of assets weighted down by risk, freeing up capital reserves for added growth. An article on Medium further explains the many benefits of capital efficiency for your business, such as how it enables the scalability of products, the expansion and optimization of teams, and leads to a more efficient product-engineering delivery process. Protecting your profits and maximizing their use will ensure the continued success of your business in the long-run.
While risk management is showing great promise in the fields of medicine, finance, and manufacturing, external threats such as natural and disasters and trade wars remain unquantifiable. As a result, various organizations are still undergoing the process of learning and developing analytics technology on a global scale. Ultimately, the road ahead for risk analytics remains paved with challenges. What you can do at present is to identify areas of risk for your business, before they start causing financial loss and further stress. For more information on this, we previously discussed how taking 'A Layered Approach to Risk Management' can provide you countless benefits, before you even think about scaling your platform.
Written exclusively for Marketplacerisk.com
by Sally McCoy